SCHWAB CHARLES CORP (SCHW)·Q1 2025 Earnings Summary

Executive Summary

• Q1 2025 delivered broad-based strength: revenue rose 18% y/y to a record $5.60B and GAAP EPS was $0.99 (Adjusted EPS $1.04), with GAAP/Adjusted pre-tax margins of 43.8%/46.2% as NIM expanded 20 bps q/q to 2.53% .
• Results beat S&P Global consensus on both EPS and revenue: EPS $1.04 vs $1.01* and revenue $5.60B vs $5.54B*; growth was powered by higher trading volumes, record Managed Investing inflows, and lower funding costs as Bank Supplemental Funding fell to $38.1B .
• Management reaffirmed positive 2025 setup: tracking toward the upper end of the full-year EPS “scenario” ($4.10–$4.20, ex-buybacks) and now quantifying 2025 NIM at 2.55%–2.65%, while holding 2025 opex growth at 4.5%–5.5% .
• Capital return is a visible catalyst: dividend raised 8% to $0.27/share and $1.5B of buybacks executed; management highlighted flexibility for additional 2025 capital return and a pending decision on redeeming $2.5B Series G preferreds later in Q2 .

Note: * Values retrieved from S&P Global.

What Went Well and What Went Wrong

• What Went Well

  • Strong client growth and engagement: Core net new assets (NNA) of $137.7B, 1.2M new brokerage accounts, daily average trades up 17% q/q to 7.39M; “Investors turned to Schwab...entrusting us with $138 billion in core net new assets” – CEO Rick Wurster .
  • Margin/NIM tailwinds and revenue diversity: NIR +21% y/y, NIM +20 bps q/q to 2.53%, trading +11% y/y, AM&A fees +14% y/y; “converted robust organic growth…into record net revenues” – Wurster .
  • Balance sheet and capital: Bank Supplemental Funding cut $11.8B to $38.1B; dividend lifted to $0.27; $1.5B buyback; “poised for additional capital return over the course of 2025” – slides/CFO .

• What Went Wrong

  • Market headwinds and sweep cash decline: Equity weakness and client net equity selling pressured balances; transactional sweep cash fell $10.8B q/q to $407.8B .
  • Expense growth and revenue per trade pressure: GAAP expenses +7% y/y (Adjusted +8% y/y) with seasonal start and higher volume-related costs; revenue per trade fell to $2.05 (−7% q/q) .
  • 2Q seasonality constraints: Management flagged typical April tax outflows and a likely slower pace of supplemental funding reduction in 2Q even as further progress is expected .

Financial Results

Segment revenue mix (USD Millions)

Key KPIs and balance sheet

Guidance Changes

Note: Company frames outlook as scenarios; not formal GAAP guidance.

Earnings Call Themes & Trends

Management Commentary

• “Schwab delivered growth on all fronts…into record net revenues totaling $5.6 billion.” – President & CEO Rick Wurster .
• “Net interest margin expanded sequentially by 20 basis points to 2.53%…we further reduced Bank Supplemental Funding to $38.1B at quarter-end.” – CFO Mike Verdeschi .
• “We still expect full year 2025 net interest margin to expand into the 2.55% to 2.65% range…currently tracking around the upper end of the full year scenario ($4.10–$4.20).” – CFO .
• “We expect to open up around 16 new branches this year…[and] grow roughly 250 new financial and wealth consultants during the year.” – CEO .
• “Our goal is…to launch direct spot crypto…in the next 12 months.” – CEO .

Q&A Highlights

• April activity and sentiment: Two record trading days; heightened log-ins; modest risk‑off with slightly higher cash, lower margin, and net equity selling—yet earnings resilient given cash dynamics .
• NNA acceleration drivers: Post‑integration normalization for Ameritrade clients (retail NNA +50% y/y); volatility supports inflows; Advisor Services also strong (+19% y/y NNA) .
• NIM and balance sheet: Faster supplemental funding reduction aided by cash trends; asset sensitivity remains a headwind if rates fall, but FY NIM still expanding; flexibility to manage scenarios .
• Expense cadence: Q1 seasonal uptick and volume-driven costs contemplated within full‑year +4.5%–5.5% opex plan; investing for growth and efficiency .
• Funding mix and capital: Target diversified, efficient funding; continued paydown at the banks; capital formation supports dividends, opportunistic buybacks, and potential preferred redemption .

Estimates Context

Note: * Values retrieved from S&P Global. EPS estimate mean based on 18 estimates; revenue estimate mean based on 12 estimates. Actuals per company.

Key Takeaways for Investors

• Positive estimate revision risk: A clean beat on both revenue and EPS with explicit NIM range and “upper-end” full‑year EPS tracking should support upward revisions and multiple resilience .
• Structural NIM tailwinds: Sequential NIM expansion and continued reduction of high‑cost funding underpin margin improvement through 2025, even with a lower-rate forward curve .
• Organic growth engine: Robust NNA, new accounts, and record Managed Investing flows (plus branch/advisor investments and AI tools) position SCHW for fee diversification and durable top‑line growth .
• Trading optionality: Elevated DATs and 24/5 trading, with potential crypto launch within 12 months, add upside levers in volatile markets .
• Capital return: Dividend increase and $1.5B buyback executed; further 2025 capital return is likely, with a near‑term preferred redemption decision as a catalyst .
• Watch 2Q seasonality: April tax outflows could slow supplemental funding paydown near term; management still expects progress each quarter .
• Risk checks: Equity market direction and rate path remain key variables, but diversified revenue and strengthened balance sheet improve earnings durability across environments .